Tesla's struggle to lure buyers paints a grim economic picture
Thinning profits at Tesla Inc. and signs of broader weakness in the US auto industry are sending ominous signals for the US economic outlook.
Tesla's troubles are no secret as Elon Musk's company has repeatedly cut prices to lure reluctant buyers. But the problem goes beyond the high-profile electric-vehicle maker: Auto-lending giant Ally Financial Inc.'s first-quarter profit took a hit as it made fewer loans and set aside money for defaults, and dealers AutoNation Inc. and Lithia Motors Inc. sold fewer cars, trucks and SUVs. Meanwhile, auto loan delinquencies are rising.
The trend is troubling because auto companies typically struggle during downturns when people balk at making big-ticket purchases. This time could be even worse as businesses and consumers are also grappling with stubbornly high inflation and steeper borrowing costs. Retail sales slid in March by the most in four months, and a slowdown at auto dealers played a big part.
“Auto demand and pricing dynamics are a canary in the coal mine for the consumer,” said Matthew Tuttle, the chief executive officer of Tuttle Capital Management. It's a sobering lesson for investors broadly, as even the “recent demand for mega-cap technology stocks is a flight to relative safety from fully invested portfolio managers.”
Auto stocks, especially car manufacturers, retailers and parts suppliers, have nosedived this week. The S&P Composite 1500 Automobiles & Components Index (S15AUCO) is down about 10% through Thursday's close, while the S&P Composite 1500 Automotive Parts & Equipment Index (S15AUTP) has lost about 2%. Both gauges fell in early trading Friday.
Tesla shares have also slumped this week, losing about 10% through Thursday's close. It lowered prices of two
Read more on tech.hindustantimes.com
